Court holds director liable for company's failure to comply with FWO's notices

The Federal Circuit and Family Court of Australia has ruled that a director is also liable for a company’s non-compliance with notices issued by the Fair Work Ombudsman. The compliance notices related to underpayments of certain employees and the company’s director tried to argue that the miscalculations were due to “inaccurate payslips". He tried to pin the blame on accounting but the court found he was “not an innocent victim of fraud by the accountants".

The company operates two bakeries and has 11 staff. Its director is a baker by trade and was its sole director. After an investigation launched from its employee’s requests, a Fair Work Inspector (FWI) found that the company contravened terms of the General Retail Industry Award 2010 and the National Employment Standards.

The Fair Work Ombudsman (FWO) then ordered the company to “calculate and rectify any underpayments and superannuation owed” to the involved employees.

The company said they had made several attempts to calculate the amount but the FWO told them “the amounts were wrong". The company argued that “the FWO would not tell them what the correct amounts were, even though they were very willing to pay them".

The court ruled that an employer cannot blame the FWO for the employer’s violation of workplace laws. The court said that “while it would have been helpful for the [FWO] to tell [the company] exactly how much was outstanding, payment of correct wages is ultimately the employer’s responsibility".

“Employers are responsible for calculating the amounts due to their employees. While it is not necessarily easy, it is the employer’s responsibility. It is also the employer’s responsibility to keep accurate records of employee’s working hours and accurate payslips,” the court said.

The court noted that the company tried to comply by posting the outstanding amounts but failed to pay them on the due date.

When the company director tried to avoid liability, the court said he was “ultimately responsible for, and involved in, all of the actions of [the company].”

The court noted that he was “a sole director at all material times” and “was personally involved in all of the steps leading to the underpayments themselves and the failure to comply with the compliance notices.”

The court ultimately found the company and its director liable to pay according to FWO’s orders. The director was found to be accessorily liable.

Takeaways for HR

• Employers have to be vigilant when dealing with payroll. Underpayments of any nature won’t be tolerated by the courts.
• Employers are responsible for calculating the underpayments. While it is not necessarily easy, it is the employer’s responsibility.
• Employers must keep up to date and accurate accounts of all payroll activities